RBI revises affordable housing loan limits

The increase in repo rate by 25 bps by the Reserve Bank of India (RBI) on June 6 may lead to a corresponding increase in home loan rates, thereby making home loans dearer, which may further depress the demand for housing in the country. In order to mitigate the impact of repo rate hike on the real estate sector, the RBI has decided to revise the eligibility limits for housing loan under priority sector lending (PSL) from the existing ₹28 lakh to ₹35 lakh in metropolitan centres (with population of 10 lakhs and more), and from the existing ₹20 lakh to ₹25 lakh in non-metropolitan centres, provided the overall cost of the dwelling unit in the metropolitan centre and non-metropolitan centres does not exceed ₹45 lakh and ₹30 lakh, respectively.

The RBI will issue a circular to this effect by June 30, 2018. The RBI decision would bring the PSL guidelines in line with the affordable housing scheme and provide a fillip to low cost housing for the economically weaker sections (EWSs) and lower income groups (LIGs). The Central government provides a subsidy of Rs 2.68 lakh under the Pradhan Mantri Awas Yojana for the affordable housing segment.

The RBI move will benefit both the homebuyers as well as the real estate developers. The increased limits of Rs 35 lakh and Rs 25 lakh in metropolitan and non-metropolitan centres, respectively, for PSL lending will bring in lot more options for the potential home buyers and also bring in many more developers to cater to the segment. Therefore, increasing the purview of the PSL for the affordable housing segment is expected to counter the negative impact of increase in home loan rates.